367 lecture 2

670 views

Published on

Opportunity Costs
PPC
Comparative Advantage

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
670
On SlideShare
0
From Embeds
0
Number of Embeds
422
Actions
Shares
0
Downloads
16
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

367 lecture 2

  1. 1. HEN 368Health Economics
  2. 2. Yabut
  3. 3. Opportunity CostsProduction Possibilities Curve Comparative Advantage Comparative Advantage Comparative Advantage
  4. 4. IntentResultResultResult
  5. 5. Fell Pushed JumpedResult the sameResult the same
  6. 6. Why are you here?
  7. 7. Opportunity Cost Cost Highest Valued
  8. 8. Possibilities Curve Curve Curve
  9. 9. Production Possibilities Frontier
  10. 10. iPods to iPads 3 to 1iPads to iPods 1 to 3
  11. 11. iPods: 900,000 iPads: 0 iPods: 600,000 iPads: 100,000 iPods: 300,000 iPads: 200,000 iPods: 0 iPads: 300,000
  12. 12. Bows Out Due toOpportunity Costs
  13. 13. Innovation that onlyhelps iPad production
  14. 14. Innovation that helps both.
  15. 15. Absolute Advantage Produce more with the same resourcesComparative Advantage Produce at a lower opportunity cost
  16. 16. David Ricardo (1772 - 1823) Principles of Political Economy and TaxationComparative Advantage
  17. 17. Utopia vs. RealityReality always losesRealistic Alternatives
  18. 18. Positive What is Fact NormativeWhat ought to be Values
  19. 19. FactsTrue or False ValuesGood or Bad
  20. 20. The basis for trade iscomparative advantage, not absolute advantage.
  21. 21. No Trade 2 Hooks and 2 Fish 10 Hours - 5 Hours per Fish Total Gale Ali HoursMake a 3 2 5HookCatch 4 1 5a FishTotal 7 3 10Hours
  22. 22. With Trade 2 Hooks and 2 Fish 8 Hours - 4 Hours Per Fish Total Gale Ali HoursMake a 2 hooks 6Hook 6 hoursCatch 2 fish 2a Fish 2 hoursTotal 6 2 8Hours
  23. 23. Saudi Idaho
  24. 24. Saudi Arabia Idaho Dates Potatoes Dates Potatoes 24 0 6 0 20 1 5 5 16 2 4 10 12 3 3 15 8 4 2 20 4 5 1 25 0 6 0 30 Ratios Ratios 24 to 6 6 to 304 Dates for 1 Potato 1/5 Dates for 1 Potato 6 to 24 30 to 61/4 Potato for 1 Date 5 Potatoes for 1 Date
  25. 25. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 16 2 21 12 3 8 4 18 4 5 0 6 15 Saudi PPF Dates Potatoes 12 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
  26. 26. Internal Dates Potatoes Price Idaho 5 Potatoes 1/5 Date Saudi 1/4 Potato 4 Dates
  27. 27. No Trade Dates Potatoes Idaho 3 15 Saudi 12 3 Total 15 18
  28. 28. Specialize Dates Potatoes Idaho 0 30 Saudi 24 0 Total 24 30
  29. 29. Analysis Dates PotatoesNo Trade 15 18 TotalsSpecialize 24 30 Totals Gain +9 +12
  30. 30. Trade Dates Potatoes Idaho 3 to 12 = +9 15California 12 3 to 15 = +12 Total 24 30
  31. 31. Dates Should Idaho and Saudi Trade? 27 Idaho 24 gains 9 Dates 21 18 15 Saudi Trade PPF PPF Saudi 12 gains 12 potatoes 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
  32. 32. MarketsWhere Buyers and Sellers TradeWhere Buyers and Sellers TradeWhere Buyers and Sellers Trade

×